A key feature of people who argue ‘this time it’s different’ is that their evidence is often temptingly convincing
There are two phrases no person should ever utter. The first is, “Do you know who I am?” and the second is, “This time it’s different.” The first suggests vanity beyond reality, since obviously the person being spoken to doesn’t know who you are or, even worse, doesn’t care.
The second suggests naivety about history and humanity. So when anyone says bitcoin, for example, is unprecedented, your scepticism levels should zoom into the red zone.
One of the key features of people who argue that “this time it’s different” is that their evidence is often temptingly convincing. Bitcoin prognosticators argue that the virtual currency’s chief virtue is that its design is attuned to the modern digital era and consequently contains utilities that “fiat currency” does not. The key to that design is a distributed ledger that records every debit and credit instantly, frictionlessly and freely. The ledger constitutes a threat to institutions that impose themselves between creditors and debtors, otherwise known as banks.
This is true in a way, but cash is also a kind of distributed ledger. When a cash transaction takes place, the debtor’s account is reduced and the creditor’s account is advanced instantly, frictionlessly and freely. The fact is that over the years, people have been discovering new ways to solve an old problem: how to ensure that transactions between people physically distant from each other are credible to both. And in doing so, they face the same problem. Creditors want money to grow slowly, debtors want it to increase quickly.
Over the past decade, debtors have been winning at an alarming rate. In the US, for example, since the start of the recession in 2008, the amount of cash and near-cash — the thing economists describe as M2 money supply — increased from $7.5-trillion to about $10-trillion in 2012. That increase would normally take about a decade.
In some sense, bitcoin might be a response to this predicament. It seeks to solve the tension between creditors and debtors by coming down squarely on the side of creditors. There is a limit to the number of bitcoins that can be mined — it’s just less than 21-million, about double the number that have been minted so far. Hence, the currency is designed in such a way that its value will increase.
Source/More: EDITORIAL: Is bitcoin truly a new ball game?